Malaysia | Mandatory EPF contributions for foreign workers

​In conjunction with the announcement made by the Prime Minister Datuk Seri Anwar Ibrahim on 3 February 2025, the EPF Board has issued an official media release on 25 June 2025, confirming that mandatory Employees Provident Fund (EPF) contribution will be enforced for all non-Malaysian citizen employees working in Malaysia and earning wages, regardless of nationality.

This change marks a shift from the current voluntary contribution framework to a compulsory regime, consistent with the MADANI Government’s priorities to enhance equity and fairness in the Malaysian labour market as outlined in Budget 2025.

The detail

Non-Malaysian citizen employees who are required to contribute under the EPF scheme

According to the EPF statement dated 25 June 2025, all employers who employ foreign workers possessing valid passports and passes that permits them to work by the Immigration Department of Malaysia (except foreign domestic workers), are obliged to ensure that their foreign workers are contributing to the EPF scheme through the provision under the Employees Provident Act 1991 taking effect with wages for the month of October 2025.

Non-Malaysian citizen employees holding the following types of passes will be subject to EPF contributions:

• Visitor’s Pass (Foreign Workers except Foreign Domestic Helpers*)
• Employment Pass
• Professional Visitor Pass
• Student Pass (where employment is allowed)
• Residence Pass
• Long-Term Social Visit Pass

*According to Section 3 of the Workmen’s Compensation Act 1952, “Domestic servants” are individuals who work as, among others: Maid, Cook, Gardener, Cleaner, Babysitter, Driver and others.

Rate of contribution

Both the employer and the foreign worker are each required to make contributions to Malaysia’s EPF at the rate of 2% on the foreign worker’s monthly wage. Revision on the statutory contribution rate will be made from time to time as applicable.

Contribution rates for Non-Malaysian citizen employees starting from October 2025:

Non-Malaysian citizen employee category	Contribution rates effective from October 2025
	Less than 60 years old		Attained 60 years old
	Employer	Employee	Employer	Employee
Non-Malaysian citizen employees who are permanent residents in Malaysia	13% or 12%	11%	6.5% or 6%	5.5%
Non-Malaysian citizen employees who became EPF members before 1 August 1998	13% or 12%	11%	6.5% or 6%	5.5%
Non-Malaysian citizen employees who became EPF members after 1 August 1998	2%	2%	2%	2%

EPF contribution for foreign workers effective date and contribution deadline

The expansion of EPF mandatory contribution coverage to non-Malaysian citizen employees will take effect from the October 2025 wages. Contribution payment is due on the 15th day of each following month. For October 2025 wages, the contribution is due by 15 November 2025.

Cessation of contribution

Liability to contribute for non-Malaysian citizen employees should cease in the last 2 months before the employee’s pass expires.

Withdrawal of contributions

Foreign employees who are no longer employed in Malaysia or intend to permanently leave Malaysia can apply for full withdrawal of the contributions together with dividends declared without any further tax implications. The withdrawal process should commence 2 months before the expiry of work permit, termination of contract by employer or date of resignation. For more details, please refer here.

Other administrative matters

Employers need to ensure that the amount of contributions, both by employer and employee, are stated in the payslip and given to the foreign worker.

Non-Malaysian citizen employees who wish to maintain the employee’s contribution rate at 11% after the effective date must submit the excess contribution election form to their employer. The employer must also submit the application to contribute above the statutory rate via i-Akaun (employer).

Key considerations for Malaysian employers

There are several important points to be taken into consideration by Malaysian employers before the enforcement date:

1. Mandatory registration and contribution

Malaysian employers are required to register all eligible non-Malaysian citizen employees with the EPF Board and contribute according to the statutory rate.

2. Review and update company’s internal policies to reflect mandatory changes

Malaysian employers should review Company’s internal policies and remuneration package for non-Malaysian citizen employees, and update as applicable.

3. Malaysia employment tax implications 

If an employer elects to bear both the employer’s and employee’s share of the EPF contributions, the employee’s portion paid by the employer will be treated as a taxable perquisite. This will result in the following:

• Additional employment income subject to tax in Malaysia
• Higher monthly tax deduction (MTD) and tax payable during annual tax return filing
• Increased employer compliance obligations in payroll and tax reporting

4. Assess overall assignment/mobility cost

Overall assignment cost may increase due to:

• Mandatory retirement/pension contributions in both home and host country during the assignment and revised equalisation policy under such circumstances.
• Tax implications on employees’ contributions borne by employer (see point no. 3 above)

Notwithstanding the above, the lump sum withdrawal of the employer and employee contributions together with the dividends declared prior to the permanent departure of the employee from Malaysia will not attract any further tax implications.

Points Requiring Further Guidance From the EPF Board

While the EPF Board has stated the contribution position for foreign employees in their FAQs, there are certain ambiguities to be clarified for the following circumstances:

a. The position of contribution for foreign employees in Malaysia who are also required to contribute to their home country pension/retirement funds and whether there is any exemption given that Malaysia has no totalisation agreements with other countries on pension contributions.

b. The position of foreign employees paid from an overseas payroll and where the costs are not charged back to the Malaysian entity.

How can we help

We strongly recommend employers to begin reviewing their compensation structure and payroll systems in preparation for the upcoming changes to mitigate tax exposures and ensure full compliance.

Our software is readily equipped with the new mandatory update given from the government and future-proof for any future changes!